GST on Insurance: Health, Life and Motor Policies

Individual health and life insurance policies carry no GST since 22 September 2025; the rate was 18% before that. Motor insurance for your car or bike still attracts 18% GST, and so do group policies bought by employers. Third-party cover for goods carriages dropped from 12% to 5%.

Key facts

The exemption came from the 56th GST Council meeting on 3 September 2025. It was notified in Notification No. 16/2025-Central Tax (Rate) dated 17 September 2025 and took effect on 22 September 2025.

Which policies are exempt

The Department of Financial Services (DFS) says the exemption covers all individual life and individual health insurance policies, including family floater plans. The government’s FAQ on the Council’s decisions adds term, ULIP and endowment life plans, and senior citizen health policies. Reinsurance of these policies is also exempt.

The test in the notification is simple: the insured must not be a group. A policy for you alone, or for you and your family, qualifies.

The DFS FAQ also settles a few edge cases:

If you pay for health insurance under the old tax regime, see our Section 80D guide for the deduction limits.

Motor insurance: current rate

The GST 2.0 changes did not touch motor insurance for private vehicles. Insurers still add 18% GST to third-party, own-damage and comprehensive premiums, and to add-ons such as zero depreciation, as Policybazaar and Go Digit’s guides state. A ₹10,000 premium therefore costs ₹11,800 with tax.

What did change is the tax on vehicles themselves. Small cars and motorcycles up to 350cc moved from 28% to 18% GST. A lower car price can mean a lower insured declared value, and so a slightly lower own-damage premium for a new car, according to Policybazaar. The tax rate on the premium stays at 18%.

The one motor cut was for commercial transport. The Council cut GST on third-party insurance of goods carriages from 12% to 5%, with input tax credit (ITC) still allowed. The third-party vs comprehensive insurance page explains what each cover pays for.

Group and corporate policies

DFS says the 18% rate continues on group insurance. That includes employer-sponsored group health cover, group life, group credit life and group term policies. If your employer pays for your cover, the premium it pays still carries GST.

Lenders often cover borrowers under group credit life policies. If your loan came with such cover, expect GST on that premium and check the sanction letter or receipt for the tax line.

Riders and top-ups

For life insurance, Bandhan Life’s FAQ states that riders such as accidental death and critical illness cover attached to an individual policy are also GST-free. For health insurance, DFS treats covers built into a single individual product as exempt.

A top-up or super top-up policy bought in your own or your family’s name is itself an individual health policy, so the same test applies. Where a top-up is bought through your employer’s group scheme, the insured may be a group, and the 18% rate can apply. Check the tax line on the premium receipt.

Renewal bills: what to check

GST applies according to when you pay. DFS explains the rules for policies that straddled the change:

1. Check the payment date. If you paid a premium on or after 22 September 2025, no GST applies, even if the due date was 21 September 2025.
2. For instalment premiums, check each instalment separately. Instalments paid before 22 September 2025 carried 18%; later ones are exempt.
3. For an advance paid before 22 September 2025 against a later premium, look at three events: supply, invoice and payment. If two of them fell on or after 22 September 2025, the exemption applies.
4. Compare the base premium on your renewal notice with last year’s, not only the total. Insurers can no longer claim ITC on commissions and brokerage for exempt policies, according to the government’s FAQ on the Council’s decisions, which raises their costs.
5. If an individual policy still shows GST after 22 September 2025, ask the insurer for a corrected receipt. The IRDAI grievance process applies if it does not respond.

Can businesses claim ITC?

ITC on insurance is limited by section 17(5) of the CGST Act, 2017:

Our GST rates and slabs page lists current rates for other goods and services, and GST 2.0 one year on covers the wider rate changes. For ITC on mixed-use vehicles or staff policies, a GST practitioner can confirm your position.

Frequently asked questions

Is there GST on health insurance now?

Not on individual and family floater policies. They have been exempt since 22 September 2025. Group health policies still carry 18%.

What is the GST on vehicle insurance?

18% on private car and two-wheeler policies, for third-party, own-damage and add-on premiums. Third-party insurance of goods carriages is taxed at 5%.

Does my employer’s group medical policy attract GST?

Yes. DFS confirms employer-sponsored group health and group life policies continue at 18%.

Is term insurance GST-free?

Yes, individual term plans are exempt, along with ULIPs and endowment plans.

I paid my premium on 20 September 2025. Can I get the GST back?

No. GST applies as on the date of premium payment, so a payment before 22 September 2025 carried 18%.

Can a business claim ITC on its car insurance?

Usually not, for cars seating up to 13 people. ITC is allowed only for specified uses such as passenger transport, driving training or resale of vehicles.

Sources

• Exemption of GST on all individual life and health insurance policies (FAQ) — Department of Financial Services (checked 16 Sep 2026)
• Recommendations of the 56th meeting of the GST Council — PIB (checked 16 Sep 2026)
• FAQs on the 56th GST Council decisions — PIB (checked 16 Sep 2026)
• FAQs-2 on the 56th GST Council decisions — PIB (checked 16 Sep 2026)
• Section 17, CGST Act, 2017 — CBIC (checked 16 Sep 2026)
• GST rate changes explainer, September 2025 — PIB (checked 16 Sep 2026)
• Impact of revised GST on car insurance — Policybazaar (checked 16 Sep 2026)
• Impact of GST on bike insurance — Go Digit General Insurance (checked 16 Sep 2026)
• GST reforms 2025 FAQs — Bandhan Life (checked 16 Sep 2026)